ECB Calls for Urgent Action From EU Leaders to Unlock Growth

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(Bloomberg) — The European Central Bank told EU leaders to take “urgent collective action” to strengthen the economy, outlining five key measures to consider ahead of an upcoming summit.

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In a letter seen by Bloomberg, the ECB called for a savings and investment union, a digital euro, a deepening of the single market, policies to foster innovation, and simpler legislation. It also explained why each of the proposals is necessary and identified concrete steps to pursue.

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The ECB’s document is the product of discussions at this week’s Governing Council meeting, in which officials expressed frustration about the lack of progress in implementing the reforms, according to people familiar with the debate. 

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They sought to offer leaders a neat checklist to peruse, adding to comprehensive reports by former Italian Prime Ministers Enrico Letta and Mario Draghi and hoping that some of the suggestions would stick. An ECB spokesperson declined to comment on the letter and its content.

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President Christine Lagarde said on Thursday that she would send a letter to heads of state ahead of a Feb. 12 meeting that outlines “what we regard as very much likely to enhance growth, to improve productivity and to really unleash the talent of Europe.”

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EU leaders want to use the gathering — which Letta and Draghi are set to attend — to hash out plans to accelerate the continent’s economic growth, unity and independence. The goal is to ultimately ensure that the US and China can’t cripple Europe’s livelihood by weaponizing control of the bloc’s supplies, services and energy.

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Lagarde has repeatedly urged action, and in a speech in November she called for more and smarter steps toward fostering European integration, not least because the continent’s export-driven business model is no longer in tune with the times.

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In the letter, the ECB argues that Europe has great potential but faces challenges including demographic shifts, subdued growth potential, and significant structural investment needs — along with a more fragmented global environment.

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“With coordinated and decisive collective action, Europe can unlock higher growth potential, strengthen resilience, and reinforce its policy autonomy and prosperity,” the ECB said. “This requires lifting productivity, mobilizing investment, and enhancing resilience.”

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It added that the Eurosystem — which is made of the ECB and the region’s national central banks — “stands ready to contribute its expertise.”

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One of the ECB’s aims is to make tokenized central-bank money available to support an integrated European wholesale market for digital assets right from the start, it said in the document, while urging the “swift completion” of legislative procedures on the digital euro. 

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In arguing to scale up equity markets and completing a banking union, the ECB called for the creation of a “common European, highly liquid, euro-wide benchmark safe asset.” That would enhance the supply of high-quality collateral, while preserving incentives for prudent fiscal policies, it said.